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Commentary provided by John Packs, Senior Investment Officer, AIG Retirement Services

Weekly Market Performance Snapshot (Week ending October 9, 2020 & Year-to-Date)

  • Dow Jones Industrial Average®: +3.3% / +0.4%
  • S&P 500® Index: +3.8% / +7.6%
  • NASDAQ Composite® Index: +4.6% / +29.1%
  • Russell 2000® Index: +6.4% / -1.9%
  • 10-year U.S. Treasury note yield on October 9, 2020: 0.774%
    - Up 8 basis points from 0.694% on October 2, 2020
    - Down 114.6 basis points from 1.92% on December 31, 2019
  • Best-performing S&P 500 sector this week: Materials, +5.1%
  • Weakest-performing S&P 500 sector this week: Real Estate, +1.4%

    Past performance is not a guarantee of future results.

The President’s Health and Stimulus Concerns Send Markets on Bumpy Ride

President Trump’s return to the White House after three days of in-patient treatment for COVID-19 lifted markets at the start of the week. Equities were then whipsawed by rising and falling expectations of additional federal stimulus, ultimately registering their best weekly performance since August.

  • While in the hospital, the president had tweeted support for a stimulus deal. However, the Dow Jones Industrial Average fell more than 300 points on Tuesday after he said that he would not negotiate further until after the election. The Dow rebounded 500 points on Wednesday after Trump backtracked on his comments.
  • Toward the end of the week, markets held out hope for a relief package for airlines, which are moving forward with laying off more than 30,000 employees. The job protection provisions were tied to a previous relief package that expired on October 1.
  • The yield on the 10-year Treasury note rose to nearly 0.8%, as the prospects of additional stimulus enticed investors away from so-called safe haven assets. The yield ended the week at its highest level since June.
  • Federal Reserve Chairman Jerome Powell warned of the risk of not providing enough economic stimulus. In a speech on Tuesday, Powell said, “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth. By contrast, the risks of overdoing it seem, for now, to be smaller. Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”
  • As the presidential and vice presidential debates got underway, markets weighed the effects of potential election outcomes. With just over three weeks to go until the election—and the possibility of uncertainty to continue past election day as results get delayed by COVID-related contingencies—expect continued volatility in markets.

Recovery Momentum Continues to Fizzle

Monthly employment figures show the momentum that was driving economic recovery over the summer has largely dissipated. 

  • The U.S. economy added 661,000 jobs in September, well below expectations. The unemployment rate fell to 7.9%, however much of the decrease was due to unemployed workers dropping out of the labor force. (People not actively looking for work are not included in the unemployment rate.)
  • The most recent weekly jobless claims report revealed that 840,000 people filed for initial unemployment claims. The figure continues to drift downward, but is only marginally lower than it was in late August. The number of people receiving continuing unemployment claims fell by one million, but is still at nearly 11 million.
  • These figures are better than most forecasters predicted for this period earlier in the year when the pandemic was taking hold. However, economic momentum is decelerating and, as we enter the traditional cold and flu season, the effects of the coronavirus could put additional pressure on growth.
  • School and office closures continue to weigh on the economy’s ability to get back to full speed. The Wall Street Journal, citing real estate industry sources, reported that about 25% of workers have returned to offices nationally. There are regional variations. For instance, 40% of workers in Dallas have returned to the office while Manhattan reports just 10%. These partially empty office buildings have negative ramifications for local businesses and reduce local tax revenue.

Treatment Progress Raises Hopes

With the economy’s path highly dependent on progress against COVID-19, investors continue to closely monitor the development of vaccines and treatments.

  • Regeneron asked the FDA for emergency use authorization for its antibody treatment for COVID-19. The drug was reportedly included in President Trump’s treatment regimen for the disease. Regeneron says it currently has about 50,000 doses available and expects to produce 300,000 in coming months. The federal government would pay for distributing the treatment.
  • Eli Lilly also applied for emergency use authorization for an antibody treatment and plans to ask for authorization for a separate combination treatment in November.
  • According to John Hopkins University, more than half of U.S. states are reporting more new cases than in the previous week. Only Alabama and Hawaii report a decline in cases.

Final Thoughts for Investors

  • As stimulus discussions and election uncertainty drive market gyrations, it’s important to stay focused on long-term investment goals. Overreacting to market movements can put your financial plan at risk. Speak with a financial professional about how to stay on track toward your long-term goals through a variety of market conditions.